A rapid shift in interest rate expectations has been observed, with implications for cryptocurrencies. The increased likelihood of an interest rate cut signals a potential rise for cryptocurrencies, as evidenced by the bitcoin price, which soared to $84,000 due to the abrupt jump in cut chances that had fallen to 30%.
Interest Rate Cut Likelihood Escalating
Federal Reserve member Williams’ announcements have been making waves by influencing the interest rate cut probabilities. As the President of the New York Fed, Williams stands out as a key figure among Fed officials. The NY Fed’s role in implementing monetary expansion or contraction makes it highly influential, akin to Chairman Powell.
Williams appears highly agitated by yesterday’s statements from Lisa Cook and has addressed them directly. His remarks are ongoing.
“I believe further adjustments in the near future might bring Fed funds rate closer to neutrality. Looking ahead, sustainably reducing inflation to our long-term 2% goal is imperative. Equally crucial is achieving this without creating excessive risks to our maximum employment goal.”
These statements surged the interest rate cut probability to 70%, buoying both the stock market and bitcoin.
A Response to Lisa Cook
In addressing Lisa Cook, Williams added the following remarks:
“History advises not to overemphasize the past five years.
We have no view on market overvaluation. Financial markets set asset prices; the Fed doesn’t assess if they are too high or low. It’s healthy for markets to control valuations.”
As part of monetary policy, the Fed impacts short-term market interest rates and volatility.
The labor market has been cooling for two years, with weakening demand and rising unemployment. The Fed’s policy is moderately restrictive.”
Another voting member, Collins, also spoke while this article was being prepared:
“September employment data came out mixed. The report did not change my view. The increase in September’s unemployment rate didn’t surprise me. The job market has clearly weakened. Yet, unemployment remains relatively low. I anticipate a slight slowdown in growth later this year.
A mildly or moderately restrictive policy is suitable. I’m reluctant to speculate on the next policy meeting. Strong demand may elevate price pressures. The interest rate cuts aided in addressing risks, given favorable financial conditions.”